Chicago increased the size of its planned offering this week of tax-exempt and taxable general-obligation bonds to $780 million from an initial $405 million, according to data compiled by Bloomberg.

The third-most-populous U.S. city is preparing to issue general obligations for the first time since 2012. Its rating was cut one step to Baa1 on March 4 by Moody’s Investors Service, which cited “massive and growing unfunded pension liabilities, which threaten the city’s fiscal solvency.”

The offering is coming during the busiest period of debt issuance since December, Bloomberg data show. Puerto Rico increased the size of its deal to $3.5 billion from $3 billion today, and California set initial yield levels on about $1.7 billion of bonds, up from a planned $1.6 billion sale.

Chicago tripled its debt load from 2002 to 2012. A $590 million additional payment for retirement obligations is due next year unless state lawmakers step in to restructure the pension funds.

I guess it's like maxing out the credit cards right before you declare bankruptcy.

Mayor Rahm Emanuel's administration sold more than $883 million in bonds this week to pay bills and maintain services, a strategy that will cost taxpayers down the road but lets him put off some difficult choices leading up to his re-election campaign.

Aldermen, whose terms are also up in the spring 2015 elections, voted last month to grant the mayor wide latitude to increase the city's debt and spend the money as he sees fit with few questions.

The council also authorized doubling, to $1 billion, Emanuel's short-term borrowing authority — essentially the city's credit card — a move that allows the mayor to cover operating expenses such as legal settlements, back pay for city workers and day-to-day maintenance.

Wednesday's bond issue allows the city to pay off the bulk of its existing short-term debt, freeing up that credit card for spending into next year.

"A well-balanced and well-managed government would not be issuing debt to pay for its operating expenses," said Laurence Msall, president of the Civic Federation, a government budget watchdog group.

More than half of the bonds — about $451 million — will cost the city more in interest payments because the money will be used for short-term expenses, rather than long-term projects such as new roads and buildings. As a result, the bonds are taxable, meaning investors who buy them must pay income taxes and in turn demand a higher interest rate.
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Over the 30-year life of the new taxable bond issue, which comes with a 6.3 percent interest rate, taxpayers will be on the hook for more than $412 million in interest in today's dollars, according to a Tribune analysis. That's roughly $58 million more in today's dollars than it would have cost just two years ago, before the city's credit rating was repeatedly downgraded, the analysis shows.

Those interest costs won't be paid off for 30 years, and the city won't start paying down the principal for 23 years, with $210 million paid in the last two years of the loan. That "back-loading" boosts the interest rate, Msall said.

The city also issued about $433 million in tax-exempt bonds, which are less costly to the city. Those bonds have varying maturity dates out to 2036 and interest rates as high as 5.25 percent.

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So while the city may be getting the best rate it can for the foreseeable future, considering what it's doing, that's not a sign of financial health, Msall said.

"For what they're doing, they are getting a favorable rate in the market, but it's the most expensive way to borrow, to basically use taxable debt, to basically use back-loaded debt," Msall said. "The taxpayers have to pay even more interest on that, and because there's not a comprehensive plan for how it's going to be paid back, it's troubling to understand how they will avoid further scooping and tossing."

All of the new debt is backed by city taxes. Before the new bonding, the city had $7 billion in tax-backed debt, more per capita than any other major U.S. city except New York.

Chicago could solve a lot of problems by merely doubling property taxes and giving inspectors, police, prosecutors, and judges commissions on generated fines.

Except that they'd just find new things to spend money on.

__________________Steve Jobs and I talked about how we wanted to make blind people as equal and capable as sighted people, and you'd have to say we succeeded when you look at all the people walking down the sidewalk looking down at something in their hands and totally oblivious to everything around them! -- Steve Wozniak

Chicago could solve a lot of problems by merely doubling property taxes and giving inspectors, police, prosecutors, and judges commissions on generated fines.

Except that they'd just find new things to spend money on.

The other question - at what point does a tax increase result in businesses and people leaving the city? Even if the move is only to an area immediately outside of the city's taxing power that reduces the tax base and results in a decrease in taxes collected, not an increase.

__________________Anyone who cannot cope with mathematics is not fully human. At best he is a tolerable subhuman who has learned to wear shoes, bathe, and not make messes in the house.

CHICAGO, March 13 (Reuters) - Investors flocked to Chicago's $883 million bond sale this week, though the city paid a higher price to borrow than at its last general obligation offering in 2012.

The sale, which also included taxable bonds, was Chicago's first GO offering since Fitch Ratings and Moody's Investors Service downgraded its credit last year, mostly on concern about the city's underfunded public pensions.

Moody's was active as recently as last week, cutting Chicago's rating one notch to Baa1.

New tax-exempt bonds due in 2036 priced at 161 basis points over comparable maturity top-rated bonds on Municipal Market Data's benchmark yield scale. In the city's 2012 sale, the spread for comparable Chicago bonds was 89 basis points over the scale, according to MMD, a unit of Thomson Reuters.

The deal, which priced on Wednesday through Wells Fargo, attracted $3.65 billion in orders from institutional investors, including dozens that had not bought the city's bonds before, Lois Scott, Chicago's chief financial officer, said on Thursday.

She said investors were increasingly relying on their own credit research and less on rating agencies.

I highly doubt they think Chicago is more creditworthy than Moody's is pegging it.

New York, March 14, 2014 -- Moody's Investors Service has downgraded the general obligation (GO) rating of the Chicago Park District (CPD) (IL) to A3 from A1. The district has $453 million in General Obligation Limited Tax (GOLT) debt and $373 million in General Obligation Unlimited Tax (GOULT) debt outstanding. The outlook remains negative.

SUMMARY RATINGS RATIONALE

The A3 rating on CPD's GOULT debt reflects the district's close governance ties to the City of Chicago (Baa1 negative). (For more information on the City of Chicago, please refer to our rating downgrade report of March 4, 2014.) Given the nature of the park district's mission and the extreme pressures facing the city, we believe CPD's financial operations and position could be indirectly affected through city officials' influence on, for example, cost allocations and levy setting. The A3 rating on CPD's GOULT debt also reflects the high debt and pension burdens of the city and the Chicago Public Schools (CPS) (Baa1 negative). These three entities are coterminous and share a highly leveraged tax base. The A3 rating on CPD's GOULT debt further incorporates certain strengths of the district, including its strong financial operations and ample reserves; manageable direct debt burden; and recent reforms to its pension system.

The A3 rating on CPD's GOLT debt is based on the credit characteristics inherent in CPD's GOULT credit profile and the nature of CPD's GOLT pledge. The district's outstanding GOULT debt is secured by a pledge to levy a tax without limitation as to rate or amount. The district's outstanding GOLT debt is supported by a dedicated levy that is unlimited as to rate but limited in amount by the amount of the district's debt service extension base (DSEB). Given the ample debt service coverage of CPD's GOLT debt service provided by the levy available under the DSEB, the rating on the GOLT debt is the same as that of the GOULT debt.

CHICAGO - Chicago is readying up to $1 billion of water and sewer revenue bonds to fund work on the aging systems, buoyed with a funding boost from steep rate increases.

The city intends to sell in the coming months about $475 million in new money water revenue bonds and another $100 million in refunding bonds for savings. It also will sell in a separate transaction about $325 million of sewer revenue bonds with an additional $100 million refunding piece. The refunding components are dependent on interest rates.

The city's finance department introduced ordinances at a City Council meeting this week authorizing the issuance. The Finance Committee is expected to review the ordinances later this month. The full council must approve them. The city has not yet announced the financing teams.